A hard money loan is considered a special type of loan that is specifically related to real estate. These loans are from a private lender and are usually backed by property. These types of loans differ from traditional lender options in that they are not provided by traditional lenders. In addition, these loans often have shorter repayment periods, from six months to three years. There are some special types of loans that can be funded by a hard money loan.
Fix and Flip
A fix and flip loan funded through private lending is a loan that funds the purchase of a property that allows you to fix up a house and then flip it. To flip it means that you immediately sell the house and earn a profit from the sale. These types of loans may also be called renovation loans because they can provide money quickly for the purchase and renovation of a house. Of the homes flipped, 58.3% are purchased with cash, while 41.7% are purchased with financing.
Loans for Construction
If you have a project that includes new construction, private lending may be the best option for your project. There are many different types of construction loans. These various loans are construction-only loans, owner-builder loans, and construction to perm loans.
If you need a loan just to get you through a short period of time while you are waiting to get more permanent funding, private lending may be the way to go. Or if you may need to repay an obligation quickly, you could also utilize a bridge loan for this.
Private lending may be ideal when you need GAP funding. This is money that helps to cover the difference between your first mortgage and a renovation loan. GAP funding is a type of bridge loan because it is intended to cover a specific event or period of time.
There are times when hard money loans are ideal for your specific situation. If you need money for any of the examples listed here, you may want to consider this type of loan. Before you consider a hard money loan, you should first consider your circumstances and needs.